Major Trends that the ESG sector will see in FY 23-

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The term ‘Boom’ is defined as a period of elevated or increased growth within a
business, market, industry, or economy. ESG term loans now exceed USD 41 trillion globally,
and the market is nowhere near complete exploration let alone saturation. Welcome to the new
decade(s) of the ESG boom.

India is a tiny (comparatively) market for ESG, but that just means the Indian ESG
market is aggressively expanding. And all the signs are pointing towards just that. A small
indicator is India’s climate-tech firms which attracted a modest USD 3.7 Billion in funding in
2022. But this number is a six-fold increase from 2021! This is all the more pertinent when you
realise that that year the start-up funding in India was down 40%. The ESG market is here to
stay and expand in a manner reminiscent of the IT boom. So all that remains is for us to
understand the major trends within this lucrative market from an Indian perspective.

INFRASTRUCTURE

And the first place we should look is where the most development is…the Indian infrastructure.
The inauguration of the ambitious USD 1.2 trillion ‘Gatishakti’ project aims to bring about a
revolution in India’s connectivity by road, rail, plane and ship. Infrastructure projects act as
catalysts for the logistics and transportation industry, not to mention the slight growth that the
real estate sector will see because of this. Moreover, industries that complement this project
such as IT communications, water, sewage, and energy transmission will also receive a heavy
boost. All these industries have a very severe environmental and societal impact that must be
mitigated. And thus all these various industries will augment the ESG market directly.

5G

The 5G marketspace in India is set to be worth USD 232 billion by 2025. In fact, as a tech, not
only will it first create its own space, but will eventually start to cannibalise on the 4G space as
well. And better connectivity means more downloads, means more online meetings, means
much much more data. The IT industry already has a larger energy requirement than the
aviation industry. By 2030 it's predicted to rival the national energy requirement of Sweden.
Already close to a third of wireless operators in India have committed to energy efficiency
initiatives. The tech itself is going to revolutionize an industry which has yet been very carbon-
intensive. Given 5G’s basis in low power but very high performance, this quality can be used to
plan cities better where green spaces can now be effectively marked as soon as 5G becomes
more the norm than the novelty. And that is supposed to happen within the year.

SMALL & MID-SIZED BUSINESSES

So far ESG has been the domain of large enterprises. ESG implementation and its rewards
seem too ponderous and labour (& cost) intensive for mid or small-sized businesses to invest in
them. Too many parameters (Close to 800) and too huge of a checklist. But SEBI has changed
that virtually overnight. The introduction of a BRSR core which comprises just 50 parameters
has streamlined the entire ESG disclosure process while adding reliability and accuracy. This
will have a stimulating effect in ensuring the penetration of the ESG market to all sized
industries.

ESG INVESTMENTS

It follows logic. Make ESG disclosures more accurate and reliable; reduce the parameters to
avoid complexity. Then use these very reliable readings to predict the market. The next thing is
investments in the form of mutual funds, bonds, debt securities and others. Welcome to the new
and expanding world of Impact Finance. In India alone, the meteoric rise of ESG investment has
necessitated the creation of an ‘ESG’ mutual fund category. Numerous green bonds (& yellow
and blue bonds!) are now floating about in the market. The government of India has undertaken
to issue sovereign green bonds to assist in green infrastructure.

INDIA & GLOBAL TRADE

As India wakes to her true economic potential, it stands to reason that this potential cannot be
realised without international finance. And international finance responds best to ESG
disclosures. Not only will this increase cooperation between nation’s to formulate a greener
framework for commerce, but it will also facilitate the death of ‘Greenwashing’ and the creation
of a more transparent monitoring system. A case in point is the EU, India’s third-largest trading
partner. Anything that is imported into the EU must comply with the 22 standards of the
European Commission, with no exceptions.

Conclusion

ESG trending is not a nuanced space, at least it won't be for the next 5 years or so. Given how
each day, the intrinsic value of ESG disclosures is being understood globally coupled with the
willingness of governments worldwide to mandate the disclosure through the law, there is no
ceiling for ESG in the foreseeable future. A good place to start is the five areas mentioned
above, but by no means is this an exhaustive list of the trends within the vast ESG ecosystem,
as we are discovering daily.